The Statute of Limitations on Collections is the amount of time that the Internal Revenue Service (IRS) has to collect a tax liability from a taxpayer. The date that taxes expire is referred to as the Collection Statute Expiration Date (CSED). According to the Internal Revenue Code, Section 6502, the IRS generally must collect the tax owed “within 10 years after the assessment of the tax.” Depending on the taxpayer, the assessment of tax may be the date a taxpayer files a tax return with a balance owing or the date that the IRS files a tax return on behalf of a non-filer taxpayer. Thus, the statute of limitations will begin once the tax has been “assessed” by the IRS.
Although the IRS generally has just 10 years to collect on an outstanding tax liability, there are certain events or transactions that may extend or suspend the statute from expiring. A variety of laws affect the CSED. For example, if a taxpayer files bankruptcy or files an Offer in Compromise, the statute of limitations is generally suspended during the time the bankruptcy or Offer in Compromise is under review. Also, additional assessments of tax owing may extend the amount of time that the IRS is allowed to collect. Therefore, if the IRS is going to collect taxes owed, they must do so within the time frame permitted by law.